UPDATE (7th May 18:52 BST): Comment added from Brian Donegan, head of operations for digital development and e-business at the Department of Economic Development and Nick Williamson, CEO of Pythia.
The Isle of Man’s Department of Economic Development today announced plans to trial the first government-run blockchain project.
Using proof-of-stake protocol Credits, developed by local startup Pythia, the department will create a registry of digital currency companies operating on the island.
Brian Donegan, head of operations for digital development and e-business at the Department of Economic Development, told CoinDesk the project marked a step towards the use of blockchain technology within government, though he stressed it remained an “experimental technical trial”.
“What we’re actually looking at is a major initiative on the back of the work the Isle of Man has been doing around cryptocurrencies … We’re the first to do this but we’ll be assessing it as we go.”
Crypto-businesses who come to the island will still require approval from the Financial Supervision Commission, the department’s regulator.
However, Donegan said it was “entirely possible” the Commission would implement a trial of its own.
“We would anticipate that at a later date that the Financial Supervision Commission will do their own dedicated register … it’s entirely possible they might want to have their own blockchain.”
Credits
Nick Williamson, CEO of Pythia, the startup behind Credits, told CoinDesk the move highlighted the “wider use” of blockchain technology outside digital currencies. He added:
“There has been a lot of talk over the past four to five years about such a thing being able to happen in the future, but we need to show the potential and show it can be a frictionless endeavour. I think this a good first step.”
The Department for Economic Development will use a customised proof-of-stake model on the Credits protocol to secure its registry.
Williamson explained the network will be manned by three “validating” nodes within the department, though anyone can download its client.
“Whenever any two of those nodes agree on a block, then that block will be part of the blockchain. Anybody who connects to the network can audit and download the blockchain. It will be interesting to see how many do connect once it’s up and running,” he said.
The benefit of using Credit’s consensus model, against bitcoin’s proof-of-work for example, is that you “only pay for the transactions that actually happen”, rather than the upkeep of the network, Williamson added.
Regulation
Including Pythia, there are 25 digital currency businesses currently based on the Isle of Man.
April saw the introduction of anti-money laundering (AML) laws that require all these firms to collect ID information and report suspicious activity to authorities.
The Financial Supervision Commission will oversee AML matters after the legislation receives Royal Assent in the UK, which Donegan hopes to happen “in the next couple of months”.
He added:
“The Isle of Man is adamant in its forthcoming regulations that it wants to protect the consumer and keep crime out. It’s very keen to use as many mechanisms, tests and technical trials that will assist that long-term objective.”
While murmurs of government involvement in Central America and Hong Kong have surfaced, the Isle of Man is the first nation to pin its colours to bitcoin’s mast.
The Department of Economic Development’s trial is set to start privately next week, with a public release expected later this month.
Additional reporting contributed by Yessi Bello Perez.